Montana health officials are proposing to monitor the charitable contributions that nonprofit hospitals make in their communities each year and set standards to justify their access to millions of dollars in tax exemptions.
The proposal is part of a package of legislation that the state’s Department of Public Health and Human Services will ask lawmakers to approve when it convenes in January. It comes two years after a state audit called for the department to play a stronger oversight role, and nine months after a KHN investigation found some of Montana’s wealthiest hospitals are lagging behind state and national averages in community donations .
Montana State Senator Bob Keenan, a Republican who has questioned whether nonprofit hospitals deserve their status as charities, said the proposal is a start that could be expanded later.
“Transparency is the name of the game here,” Keenan said.
The IRS requires nonprofit hospitals to count their “health promotion” spending to benefit “the community as a whole.” How hospitals credit such contributions to justify their tax exemptions is opaque and varies widely. National researchers studying community performance have called for tightening standards for what counts towards the requirement.
Montana is one of the latest states to consider introducing new rules or increasing oversight over nonprofit hospitals amid questions about whether they pay their fair share. dr Vikas Saini, president of the national health think tank Lown Institute, said people in California at both the state and local levels are considering whether to oversee hospital community performance and enforce new standards. Last year, Oregon introduced a minimum amount that nonprofit hospitals must spend on community services. And Massachusetts has updated its community service guidelines in recent years, urging hospitals to make more detailed assessments of how spending aligns with identified health needs.
Montana hospital industry officials said they wanted to work with the state to shape proposed legislation, which they said the industry would support if it did not conflict with federal regulations. Saini said to be effective, laws would have to go beyond federal requirements.
In recent years, more and more people like Keenan and Saini have questioned whether nonprofit hospitals contribute enough to their communities to deserve the big tax breaks they receive while becoming the city’s largest corporations.
“Hospitals are like the pillars of communities, but people are starting to ask these questions,” Saini said.
Saini’s institute reviews hospital donations each year and has found that the majority of nonprofit schemes nationwide spend less on what the institute calls “meaningful” services than the estimated value of their tax breaks. Actions counted by the Institute include financial assistance to patients and community investments such as food aid, health education or services provided at a loss, including addiction treatment.
The 2020 Montana Audit found hospitals benefit vague and inconsistent in the state report, making it difficult to determine whether their status as a charity is warranted. However, state legislatures did not address the issue during their 2021 biennial term, and a memorandum from the Legislative Audit Division issued in June found that the state health department has since made “no significant progress” in developing an oversight of charitable donations by nonprofits made hospitals.
KHN found that Montana’s nearly 50 nonprofit hospitals spent an average of about 8% of their total annual spending on charitable causes during the fiscal year ending 2019. The national average was 10%.
In some cases, hospital donation rates have since declined. For example, in the fiscal year ending 2019, Logan Health-Whitefish — a small hospital that’s part of Flathead Valley’s larger health care system — reported that less than 2% of its total spending went to charitable causes. In its most recent available documents, the hospital said it spent less than 1% of its spending on welfare for the period through 2021, while making $15 million more than it spent.
Logan Health spokeswoman Mellody Sharpton said the medical system’s overall community benefit is nearly 9% of its spending and reaches its six hospitals. It also has clinics throughout the valley. “It’s important to consider the benefits our organization brings to the community as a whole as our facilities work together to ensure the appropriate care is provided in the appropriate facility to meet the healthcare needs of our patients,” Sharpton said.
State health officials are asking lawmakers to allow the agency to draft a bill that would give the Department of Health clear authority to require hospitals to submit annual reports that include data on community services and charities. The measure would also allow the Department to develop standards for these charitable spending, as described in the Department’s proposal.
“We see a great need to get the ball moving here,” Charlie Brereton, chief of the state health department, told lawmakers in August.
Montana Hospital Association President Rich Rasmussen said his organization wants to work with the Department of Health to refine the legislation, but said the definition of what counts as benefits should remain broad to allow hospitals to focus on the most pressing needs their region can react.
In addition, the hospitals are already working on their own reporting standards. This year, the association created a manual for members and set a goal for hospitals to report their services to the community consistently by 2023, Rasmussen said. The association declined to provide a copy of the manual, saying it will be available to the public once hospitals are trained to use it later this fall.
The association also plans to launch a website that will serve as a one-stop shop for people who want to know, among other things, how hospitals report on community services and address local health issues.
Republican Rep. Jane Gillette said she supports increased Health Department oversight and the idea behind the association’s website, but doesn’t believe the hospital industry should produce this public resource on its own. Gillette said she plans to introduce legislation that would require hospitals to report data on community services to a group outside the industry — like the state — which would then publish the information online.
In the past, hospitals have resisted attempts to introduce new rules for the issuance of benefits. In an interview with KHN last year, Jason Smith, Bozeman Health’s then chief advancement officer, said the system supported efforts to improve reporting of posts “outside of new laws,” adding that hospitals could do better without “government regulators to use”. arena with us.”
When asked if the health system still stands by the statement, Denise Juneau, Bozeman Health’s chief government and community affairs officer, said hospital officials hope any new laws will be aligned with existing federal guidelines. She said Bozeman Health will continue to work with the Montana Hospital Association to define and provide better information on community benefits, with or without new legislation.
A lawmaker would have to support the state’s proposal by mid-December to keep it alive.
Kaiser Health News is a national health news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation, which is not affiliated with Kaiser Permanente.